Europe styrene facing upward pressure from benzene, Asia

26 November 2012 14:41[Source: ICIS news]

LONDON (ICIS)--European styrene prices face continued upward pressure from a bullish benzene market as December approaches, but weak end-user demand is keeping margins between the two slim, sources said on Monday.

Prompt availability for styrene in Europe remains ample, despite the force majeure at Shell’s Moerdijk site earlier this month, as offtake from key end-use markets like polystyrene (PS) and expandable polystyrene (EPS) eases ahead of the holiday period.

November material traded several times last week at $1,470-1,480/tonne (€1,132-1,140/tonne) FOB (free on board) Rotterdam, and there was even a deal done as low as $1,455/tonne on a CIF (cost, insurance and freight) basis.

The market is in contango, however, with December cargoes opening this morning relatively steady since last week’s close at $1,510-1,540/tonne, while January material was higher still at $1,530-1,560/tonne.

By the afternoon, however, the market started firming again amid rumours of production problems at the Elba site, a joint propylene oxide (PO)/styrene monomer (SM) venture between Shell Chemical Europe and BASF.

Bids for December cargoes moved as high as $1,560/tonne, and there were deals heard at $1,570/tonne for December and a prompt November trade at $1,550/tonne.

Nevertheless, it remains unclear whether the current spike will be sustainable, as the previous bull run on styrene, stemming from supply concerns following the Moerdijk force majeure was short-lived.

“It depends on whether Moerdijk comes back on line by the end of the month,” said one major consumer.

And while the next two months are looking firmer, there was some concern expressed that any significant volume of imports into Europe early next year could bring prices down sharply amid ongoing macroeconomic weakness.

“I do have a bit of a fear we are going to see a big load of imports, and January is going to see a massive fall in pricing,” one trader said.

Currently there does not appear to be arbitrage between the regions, with Asian material valued as high as $1,590/tonne FOB Korea for December, while last week the US market hovered around the $1,530/tonne level on a FOB basis, in a quiet market ahead of the Thanksgiving holidays.

Conversely, with as much as 15,000 tonnes being shipped from Rotterdam to Asia, and an additional 7,000-10,000 tonnes of space being looked for, there is even some speculation that Europe could tighten in the coming weeks despite the weak derivative demand.

With European benzene looking poised to move up further in December on bullish fundamentals, this will also maintain pressure on styrene in a market where production margins are already tightly squeezed.